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Weekly Economic Commentary


How Many New Jobs Are Necessary to Hit the Full Employment Mark?

March 6, 2012

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The Federal Reserve Bank of Atlanta has created a jobs calculator which enables quick computations to answer this question. The Fed’s projection of the long-term unemployment rate is 5.2%-6.0%, published in January, and it is the jobless rate considered consistent with full employment. Let us consider these two rates and determine how many jobs have to be created each month to reach full employment. Plugging in a target of 5.2% jobless rate at the end of 48 months from today in the jobs calculator yields 188,341 (establishment survey) – 201,467 (household survey) new jobs per month as necessary to achieve this goal. How does this compare with recent trends in hiring? In the three months ended January, an average of 201,000 (establishment survey) – 228,000 (household survey) new jobs have been added. The 3-month moving average in Chart 1 for the household survey is higher than 228,000 because it includes adjustments resulting from Census 2010. Therefore, the December 2011 three-month moving average (228,000) of employment gains is a better number to bear in mind. The range of jobs numbers in the commentary refers to the establishment and surveys, respectively. A 6.0% target jobless rate at the end of a 48-month period results in 163,473-174,866 new jobs per month as necessary according to the jobs calculator. A more interesting question is: What does it take to achieve a 6.9% unemployment rate in the next 24 months? The handy jobs calculator indicates that 175,226-187,438 new jobs per month would give us the magic number of 6.9% jobless rate. The implication is that these numbers are close to the recent experience of job creation and if this pace of hiring does indeed occur, the Fed may not have to wait until late 2014 to tighten monetary policy as their latest missive indicated.

Chart 1 - 03 06 2012











The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.